• Google Buzz

When it comes to credit cards, there are three types of people. There are the diggers who are just putting themselves in a hole and don’t realize what they are doing. There are those who are full of it, and make statements such as “I pay off my balance at the end of the month!” Finally, there are those who know what’s going on and stay away from the credit card game all together. I’m sure some of you who love your credit cards are going to get mad and say that I’m crazy, but that’s fine. You have a right to do stupid things with your money.

Let’s take a look at the first type of people, the diggers. They see credit cards as “free money.” They do not understand how badly compound interest is working against them, and how long it will be to pay off the balance by writing checks for only the minimum payment each month. They carelessly use their credit cards for every day purchases. Pretty much everyone can agree that these people are mishandling credit cards.

The second group of folks is where it becomes a bit more controversial. These are the people that think they are using their credit card responsibly. They pay off the balance at the end of the month and redeem their rewards points thinking that they are getting free money! These people do not understand that there is always the possibility of your payment somehow not getting to the bank (and it does happen), and you being charged a $39 late fee, and huge sums of interest.

There have also been a number of studies showing that your average purchase is anywhere from 10% to 50% higher when you are using a credit card as compared to cash. This is because it hurts to spend cash, whereas with credit cards that emotional pain of spending money does not exist. You will spend more money if you carry around a credit card as opposed to cash if you realize it or not.

Even knowing these statistics, some people will think that they can beat the system, and will take their 1% cash back or rewards points. These people add layers of un-necessary sophistication to their life, when cash would substitute just as well for a few dollars a month. Most rewards points are never redeemed because credit card companies make it so hard to redeem them. More often than not, it’s not worth your trouble.

The next time someone tells you that they are using their credit card responsibly, they are lying. They have accepted debt as a way of life, and because of that, they will always be in bondage to a bank, a financing company, or a mortgage company. Use your credit card responsibly by putting it in the blender.



 Related Content: